An automatic stay may stop creditor harassment

On Behalf of | Oct 30, 2018 | Chapter 7

When people are behind on their credit card payments, mortgage payments or have excessive medical debt, they may begin to receive creditor calls. At first, the calls may start out as a friendly reminder for clients to make a payment on their loan. As time passes, however, those calls can turn a bit more sinister and, in some cases, become harassing. Once people file their paperwork for Chapter 7 bankruptcy, an automatic stay moves in place, which prohibits creditors from contacting debtors regarding their overdue payments.

Creditor harassment can become a huge problem, as companies may threaten to file a lawsuit, use profane language, garnish wages from paychecks, reclaim property and even pursue legal action. These practices are illegal under the Fair Debt Collection Practices Act. With an automatic stay, creditors are unable to harass debtors through phone calls at all hours of the day, wage garnishment, initiating or pursuing lawsuits or threatening through other means.

In one case, a woman sued a credit card company after they threatened to take her children and send her to jail if she did not resume making payments. In another situation, a national debt collecting company was fined $3.2 million by the Federal Trade Commission due to harassing tactics used to scare people into paying their debt.  

There are benefits to filing for Chapter 7 bankruptcy; however, this type of debt relief is not ideal for everyone. It is important to look at the situation and evaluate whether the benefits outweigh any negativities that may occur when filing for bankruptcy.